The Executive Board of the International Monetary Fund (IMF) has completed the third review of Brazil's performance under the SDR 22.8 billion (about US$32.4 billion) Stand-By Arrangement approved on September 6, 2002 (see Press Release No. 02/40). Completion of the review allows Brazil to draw the equivalent of up to SDR 6.55 billion (about US$9.3 billion), of which SDR 2.29 billion (about US$3.3 billion) under the Supplemental Reserve Facility (SRF).

"Brazil's performance under its IMF supported program remains commendable. In completing the third review under the arrangement, Directors were in particular encouraged that all performance criteria were met, and that the submission of pension and tax reform proposals were achieved ahead of schedule. As a result of this strong policy performance, financial market variables have continued to improve, and Brazil has regained access to international capital markets on favorable terms.

"An unwavering commitment to macroeconomic stability, based on disciplined fiscal and monetary policies and efforts to further improve the composition of public debt, remains the centerpiece of the government's economic strategy. The solid fiscal outturn to date provides a strong assurance that the primary surplus target for 2003 will be achieved. In addition, the medium-term fiscal surplus target of 4.25 percent of GDP is an important commitment toward ensuring sustainable debt dynamics. The proactive response of monetary policy to inflationary pressures has resulted in a steady decline of monthly inflation rates this year.

"Continued progress on the government's ambitious reform agenda is critical to build on recent confidence gains and establish a basis for a return to strong, sustainable, and equitable growth. The pension and tax reform proposals recently submitted to congress—if enacted in full—will contribute to reducing fiscal imbalances and remove inefficiencies that hinder growth. The additional reform priorities identified by the government—including measures to make government expenditures more flexible, eliminate barriers to trade and encourage deeper financial intermediation—will help consolidate recent progress and further support a resumption of investment and growth," Ms. Krueger stated.